Tax changes for landlords in 2017

by Housesimple on 6th June 2017

With the property market feeling the crunch in the first quarter of this year, homeowners are looking to this year's Budget for an idea of where we're going next. As expected, changes to the 2017-18 tax year mean there’s a lot for landlords to wrap their heads around.

Buy-to-let mortgage payments are set to climb, with the amount claimable for maintenance taking a bit of a hit. Yet all is not lost: here's our guide to a few of the changes and how you can plan for them.

Tax relief off the table

If you’re a higher-rate taxpayer, you can no longer offset buy-to-let mortgage interest against your rental income before calculating your tax. So the net result is higher tax bills – even if you’re not earning more money.

There’s also no longer a blanket 10% reduction for wear and tear relief either. Instead, landlords can now only claim back actual costs spent on fixing up the property.

You could potentially get around the rising costs in a couple of ways. This could mean increasing the rent, remortgaging your home address to pay off some of the buy-to-let mortgage, or moving your properties to a company portfolio. Whatever plan of action you pick, speak to a mortgage adviser or accountant first – they’ll be able to offer expert advice. 

The new cost of non-compliance

Regulations around legal issues and safety in buy-to-let properties are set to tighten this year. As of 2015, all homes in England need smoke alarms – and if they have a fuel-burning boiler, a carbon monoxide alarm too. In Scotland, you have to complete stringent electrical safety tests, while Welsh landlords are subject to property and landlord licensing. You also have to make sure tenants are legally allowed to rent homes, by carrying out 'right-to-rent' checks.

So what's changing financially? From April 2017, the cost of non-compliance is steep. Local authorities can fine you up to £30,000 for repeatedly breaking the rules, so it pays to keep up on your property's safety features and your tenants' statuses. 

Stamp duty tax shifting demand 

The biggest challenge for landlords over the past 12 months has been the extra 3% stamp duty surcharge for buy-to-let or additional homes. While this change came into law last April, stamp duty is still affecting demand and house prices across the country. It can make initial purchases more expensive for would-be landlords, though it has benefited first-time buyers.

The good news is that buying properties below £125,000 can avoid the worst of it, so look to up-and-coming and developing areas to invest. If you’re thinking of becoming a landlord, make sure you check out potential buy-to-let stamp duty rates in your area before you commit.